chapter 1 flashcards.txt

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� Economics �

the study of the way people organize themselves to sustain life and enhance its quality

o The four activities:

resource maintenance and the production, distribution, and consumption of goods and services

� Positive Questions �

questions about how things are

� Normative questions �

questions about how things could be

� Intermediate goal -

achievement that will bring you closer to final goal(s)

� Final Goal �

goal that requires no further justification; it is an end in itself

� Wealth �

whatever confers the ability to produce and procure valued goods and services

� Efficiency �

use of resources in a way that does not involve any waste

� Well-being �

a shorthand term for the broad goal of promoting the sustenance and flourishing of life

� Economic actor/agent �

individual or group involved in the economic activities of resource maintenance or the production, distribution, or consumption of goods and servicesMay also include, for e. xample, legislatures whose decisions affect the kinds of economic activity that are possible, and activist who aim to prevent certain types of economic activity

� Negative externalities �

Harmful side effects, or unintended consequence, of economic activity

� Positive externalities �

beneficial side effects, or unintended consequence, of economic activity

� Transition costs �

the costs of arranging economic activities

� Resource Maintenance �

the management of natural, manufactured, human, and social resources in such a way that their productivity is sustained

� Production �

The conversion of resources into goods and services

� Distribution �

The sharing of products and resources among people

� Exchange �

the trading of one thing for another

� Transfer �

the giving of something, with nothing specific expected in return

� Consumption �

the final use of a good or service

� Abundance �

Resources are abundant to the extent that they exist in plentiful supply for meeting various goals

� Scarcity �

Resources are scarce to the extent that they are not sufficient to allow all goals to be accomplished at once

� Production Possibilities Frontier (PPF) �

Curve showing the maximum amounts of two outputs that society could produce from given resources, over a given time period

� Opportunity cost �

value of the best alternative that is foregone when a choice is made

� Technological Progress �

The development of new methods of converting inputs into outputs

� Core Sphere �

Households, families, and communities

� Public Purpose sphere �

governments and other local, national, and international organizations established for some public purpose beyond individual or family self-interest and not operating with the goal of making a profit

� Public goods �

goods for which Use by one person does not diminish usefulness to others, and It would be difficult to exclude anyone from benefitting

� Free Riders �

people who enjoy the benefit of a public good without paying for it

� Business Sphere �

firms that produce goods and services for profitable sale

� Informal Sphere �

businesses operating outside of government oversight and regulation. In less industrialized countries, it may constitute the majority of economic activity

� Microeconomics �

sub-field of general economics that focuses on activities that take place within and among the major economic organizations of a society

� Macroeconomics �

sub-field of general economics that focuses on the economy as a whole

� Model �

an analytical tool that highlights some aspects of reality while ignoring others

� Traditional microeconomic (basic neoclassical) model �

portrays the economy as a collection of profit-maximizing firms and utility-maximizing households interacting through perfectly competitive markets

�Economistic thinking �

thinking that confuses the assumption of the traditional model with reality